Labor

Saudi Arabia Imposes Quotas to Boost Local Hiring

Halah Alduhaylib strolls among the recruiting stands at a June 5-8 jobs fair in Riyadh where 10,000 positions are available. “This is my second fair this week. It’s a great chance for me,” she says. With a master’s in computing from Britain’s Manchester Metropolitan University, the 28-year-old Saudi is well-placed to benefit from the kingdom’s recent decision to reduce unemployment, a cause of unrest in many Middle Eastern countries, by forcing companies to hire more locals. That’s why at this jobs fair, only Saudis need apply.

That’s quite a change in this oil-rich country, where 9 out of 10 nongovernment employees are foreigners from the rest of the Mideast, the Philippines, Indonesia, Bangladesh, Pakistan, and even the West. Non-Saudi residents handle everything from child care to hotel management to complex engineering projects. Because foreigners generally work longer hours, have more training, and will accept much less than the average pay scale for citizens, employers usually hire them. Six million foreigners work in Saudi Arabia, where one out of three residents is foreign-born.

The newly announced quotas for Saudi nationals range from 65 percent of all workers at larger companies such as Saudi Investment Bank to 10 percent for small retailers. Companies falling short won’t get permits for foreign workers, who can still be hired in lower numbers. It’s the first time the government has “explicitly linked visas to employing Saudis,” says Paul Gamble, head of research at Riyadh-based Jadwa Investment.

While King Abdullah’s newly imposed quotas are good news for job seekers such as Alduhaylib, it will raise costs for Saudi businesses. To meet the new criteria, companies operating in the kingdom may also have to lay off foreign workers and hire locals in their place. “Saudi Arabia’s ability to absorb labor from the region will be reduced,” says Jarmo Kotilaine, chief economist at Jeddah-based National Commercial Bank.

Poorer Arab countries depend on foreign remittances—money sent home by their citizens who work in Saudi Arabia and other rich Gulf states. Egypt received $8.9 billion in private transfers from overseas, mostly from Egyptian workers abroad, in the nine months through March, according to the central bank. The Saudi contribution was $1 billion last year, according to John Sfakianakis, chief economist at Banque Saudi Fransi.

Losing a chunk of that $1 billion would pose a problem for an Egyptian government seeking to repair its tattered finances after the revolt against President Hosni Mubarak scared off tourists, shut down factories, and spooked investors. Neighboring Yemen, which has been pushed close to civil war by five months of protests, is also a big recipient of remittances from Yemeni workers in the kingdom. All told, foreign workers sent $26 billion home from Saudi Arabia last year, according to Banque Saudi Fransi.

In Egypt’s case, Saudi Arabia is cushioning the potential blow from lost remittances with $900 million in grants and loans. Such financial aid, however, will not solve the social problem posed by thousands of suddenly unemployed Egyptians returning home.

Yet the kingdom has its own social crisis to deal with. Only about one-third of Saudi adults have jobs, government figures show. Sfakianakis says last year’s unemployment rate for Saudis aged 20 to 24 was 39.3 percent, the second-highest in the region behind Iraq.

Meanwhile, almost 1 million work visas were issued to companies in 2009, more than double the 2005 number. “Saudi companies prefer the lower-paid, better-skilled foreign workers,” says Gamble of Jadwa Investment. Now “they will probably pay more for less productivity.” Non-Saudis in the country are already wondering what will happen. “All foreign workers here are worried about their jobs,” says Mohammed al-Rashidy, 23, a Yemeni administrator at Saks Fifth Avenue in Riyadh.

Gender is an issue as employers seek Saudis to hire. One of the first questions asked by Shady Hanafy, who’s recruiting for New Jersey-based construction manager Hill International, is whether applicants would work with the opposite sex.

Responses vary. Saleh Alfreihi, seeking an interior design job for his daughter, says he wouldn’t mind a “mixed environment.” Abdullah al-Hussein, a 26-year-old Islamic law graduate, says that while he prefers separation, he “would work with women in the right job.” Alduhaylib, who comes from Saudi Arabia’s Eastern Province, says she doesn’t mind working with men and is willing to relocate. “If I find the right job in Riyadh, I would move here,” she says.

The bottom line: Remittances from foreign workers in Saudi Arabia, some $26 billion annually, may drop as the Saudis start to hire more locals.